EXHIBIT 10.1
SUBSCRIPTION AGREEMENT
Advanced Aesthetics, Inc.
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Ladies and Gentlemen:
1. SUBSCRIPTION. (the "Purchaser") hereby agrees to purchase from Advanced
Aesthetics, Inc. (the "Company") (i) shares of its Series G Preferred Stock, par
value $0.01 per share ("Series G Preferred") and (ii) a warrant to purchase
shares of the Company's Common Stock, par value $0.01 per share, (the "Warrant")
for an aggregate purchase price of $ . Reference is hereby made to that certain
Confidential Private Placement Memorandum of the Company dated September 1,
2005, including all attachments, schedules and exhibits thereto (the
"Memorandum").
2. PAYMENT. Together with the wire transfer of the full purchase price for the
Series G Preferred and Warrants the Purchaser, in accordance with the
Memorandum, is delivering two completed and executed Signature Pages to each of
the Subscription Agreement, the Registration Rights Agreement (as defined below)
and the Warrant.
3. REPRESENTATIONS AND WARRANTIES.
(A) The Company hereby represents, warrants, acknowledges and agrees as
follows:
(a) The Company and each of its subsidiaries has been duly organized and is
validly existing and in good standing under the laws of each respective state
under which the entity was formed. The Company and each of its subsidiaries is
duly qualified to transact business as a foreign corporation or limited
liability company, respectively, and is in good standing under the laws of each
jurisdiction where the location of the entity's properties or the conduct of its
business makes such qualification necessary.
(b) The Company and each of its subsidiaries, respectively and where applicable,
possess all requisite power and authority (corporate and other) to conduct its
business as presently conducted and as proposed to be conducted (as described in
the Memorandum). The Company possesses all requisite power and authority to
enter into and perform its obligations under this Subscription Agreement, the
Registration Rights Agreement ("Registration Rights Agreement"), dated as of the
date hereof, between the Company and Purchaser and the Warrant (together with
the Subscription Agreement and the Registration Rights Agreement, the
"Transaction Documents") and to issue, sell and deliver the Series G Preferred
Stock and the Warrants and to issue the Common Stock upon conversion of the
Series G Preferred and/or the exercise of the Warrant. The execution and
delivery of the Transaction Documents has been duly authorized by all necessary
corporate action. The Transaction Documents have been duly executed and
delivered and constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms (i)
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally,
including the effect of statutory and other laws regarding fraudulent
conveyances and preferential transfers and (ii) subject to the limitations
imposed by general equitable principles (regardless of whether such
enforceability is considered in a proceeding at law or in equity).
(c) None of the execution and delivery of, or performance by the Company under
the Transaction Documents or the consummation of the transactions herein and
therein contemplated conflicts with or violates, or will result in the creation
or imposition of any lien, charge or other encumbrance upon any of the assets of
the Company or any of its subsidiaries under any agreement or other instrument
to which the Company or any of its subsidiaries is a party or by which the
Company and any of its subsidiaries' assets may be bound, any term of the
certificate of incorporation or formation or bylaws or operating agreements of
the Company and its subsidiaries, or any license, permit, judgment, decree,
order, statute, rule or regulation applicable to the Company or its subsidiaries
and any of their assets.
(d) Schedule 3(d) sets forth the Company's authorized and outstanding capital
stock. All outstanding shares of capital stock of the Company and each of its
subsidiaries are duly authorized, validly issued and outstanding, fully paid and
nonassessable. Except as set forth in Schedule 3(d), as of the date hereof: (i)
there are no outstanding options, stock subscription agreements, warrants or
other rights permitting or requiring the Company or its subsidiaries or others
to purchase or acquire any shares of capital stock, or other equity securities
of the Company or its subsidiaries, or to pay any dividends or make any other
distribution in respect thereof; (ii) there are no securities issued or
outstanding that are convertible into or exchangeable for any of the foregoing
and there are no contracts, commitments or understandings to issue or grant any
such option, warrant, right or convertible or exchangeable security; (iii) no
shares of stock or other securities of the Company or its subsidiaries are
reserved for issuance for any purpose; (iv) there are no voting trusts or other
contracts, commitments, understandings, arrangements or restrictions with
respect to the ownership, voting or transfer of shares of stock or other
securities of the Company or its subsidiaries, including without limitation, any
preemptive rights, rights of first refusal, proxies or similar rights
(collectively, the "Stockholder Agreements"); and (v) no person holds a right to
require the Company or any of its subsidiaries to register any securities of the
Company under the Securities Act or to participate in any such registration. The
issued and outstanding shares of capital stock of the Company conform to all
statements in relation thereto contained in the Memorandum and the Memorandum
describes all material terms and conditions thereof. All issuances by the
Company were at the time of their issuance exempt from registration under the
Act and any applicable state securities laws. Schedule 3(d) sets forth, as of
immediately following the closing of the purchase and sale of the Series G
Preferred and Warrants hereunder, a true and complete list of the holders of
shares of the Company's capital stock and any options, warrants or other
securities exercisable or convertible into shares of the Company's capital stock
and accurately lists the shares of the Company's capital stock (and any such
options, warrants or other securities exercisable or convertible into shares of
the Company's capital stock) held by each such holder on an actual and an
as-converted into Common Stock basis. The Company hereby covenants and agrees
that it will use its commercially reasonable efforts to cause all of the
Stockholder Agreements, including all of the Company's obligations thereunder,
to terminate upon the consummation of a Public Transaction (as such term is
defined in the Memorandum) except as otherwise set forth in the Memorandum.
(e) The shares of Series G Preferred Stock to be issued to the Investor, when
issued against payment therefor in compliance with the provisions of the
Subscription Agreement, will be duly authorized, validly issued, fully paid and
nonassessable and will be free and clear of all liens, charges, restrictions,
claims and encumbrances imposed by or through the Company or its subsidiaries
other than as provided in this Agreement. The Common Stock issuable upon
conversion of such shares of Series G Preferred Stock and exercise of the
Warrant has been duly authorized and validly reserved for issuance and, when and
if issued upon conversion in accordance with the Certificate of Designation of
the Series G Preferred Stock and/or exercise in accordance with the Warrant,
will be validly issued, fully paid and nonassessable. No holder of any of the
Series G Preferred Stock will be subject to personal liability solely by reason
of being such a holder. Assuming the accuracy of the representations of the
Purchaser in Section 3(B) of this Agreement at the time of issuance and subject
to the filings described in (f) below, the issuance of the Series G Preferred
Stock pursuant to this Subscription Agreement is, and, upon exercise of the
Warrant and/or conversion of the Series G Preferred Stock, the issuance of the
Common Stock upon such exercise and/or conversion will be, in compliance with
all applicable federal and state securities laws.
(f) No consent, authorization or filing with any court or governmental authority
is required in connection with the issuance of the Series G Preferred Stock,
except for required filings with the Securities and Exchange Commission and
applicable "Blue Sky" or state securities commissions relating specifically to
the transactions contemplated by the Transaction Documents.
(g) The Company and its subsidiaries have obtained all requisite licenses,
permits and other governmental authorization necessary to conduct its business
as presently, and as proposed to be, conducted, except where failure to do so
could not reasonably be expected to have a material adverse effect on the
Company or a material adverse effect on the ability of the Company to perform
its obligations under the Transaction Documents ("Material Adverse Effect").
(h) There exists no default by the Company or any of its subsidiaries or to the
knowledge of the Company any other party for the due performance under any
material agreement to which the Company or any of its subsidiaries is a party or
to which the Company or any of its subsidiaries' assets is subject
(collectively, the "Company Agreements"). The Company Agreements disclosed in
the Memorandum are the only material agreements to which the Company and its
subsidiaries are bound or by which their assets are subject. Each of the Company
Agreements is in full force and effect and constitutes a legal, valid and
binding obligation of the Company or the Company's subsidiary party to such
Company Agreement, enforceable against the Company or such subsidiary, as
applicable, in accordance with their respective terms.
(i) There are no actions, proceedings, claims or investigations, before or by
any court or governmental authority, pending or, to the best knowledge of the
Company, threatened, against the Company or any of its subsidiaries, or
involving their respective assets or, to the knowledge of the Company, involving
any of their respective officers or directors.
(j) Neither the Company nor any of its subsidiaries is in violation of,
respectively and as applicable: (i) its certificate of incorporation or
formation or bylaws or operating agreements; (ii) any indenture, mortgage, deed
of trust, note or other agreement or instrument to which the
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Company or its subsidiaries is a party or by which the Company or its
subsidiaries is or may be bound or to which any of their assets may be subject;
(iii) any statute, rule or regulation currently applicable to the Company or any
of its subsidiaries; or (iv) any judgment, decree or order applicable to the
Company or any of its subsidiaries.
(k) The Company and its subsidiaries have good and marketable title to all
property (real, personal, tangible and intangible) owned by it, free and clear
of all security interests, liens and encumbrances, except for such as are
described in the Memorandum.
(l) The Company and its subsidiaries own all right, title and interest in, or
possesses adequate and enforceable rights to use, all patents, patent
applications, trademarks, trade names, service marks, copyrights, rights,
licenses, franchises, trade secrets, confidential information, processes,
formulations, software and source and object codes necessary for the conduct of
its business, except as otherwise described in the Memorandum (collectively, the
"Intangibles"). To the knowledge of the Company, neither the Company nor any of
its subsidiaries have infringed upon the rights of others with respect to the
Intangibles and the Company nor any of its subsidiaries have received written
notice that it has or may have infringed or is infringing upon the rights of
others with respect to the Intangibles, nor has the Company or any of its
subsidiaries received any notice of conflict with the asserted rights of others
with respect to the Intangibles.
(m) The Company has delivered to the Purchaser its unaudited financial
statements for the fiscal year ended June 30, 2004 and for the nine-month period
ended March 31, 2005 (collectively, the "Financial Statements"). The Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated,
except that the Financial Statements do not contain footnotes required by
generally accepted accounting principles. The Financial Statements fairly
present in all material respects the financial condition and operating results
of the Company, as of the dates, and for the periods, indicated therein, subject
to normal year-end audit adjustments. Except as set forth in the Financial
Statements, the Company does not have any material liabilities or obligations,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to March 31, 2005 and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected in the
Financial Statements, which, in both cases, individually and in the aggregate
would not have a Material Adverse Effect.
(n) The Memorandum does not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
contained therein not misleading in light of the circumstances under which they
were made.
(B) The Purchaser hereby acknowledges, represents, warrants, and agrees
as follows:
(a) None of the Series G Preferred Stock, Warrants or shares of the Company's
common stock into which the Series G Preferred Stock and Warrants are
convertible or exercisable, as applicable (collectively, the Series G Preferred
Stock, Warrants and common stock are referred to as the "Securities") are
registered under the Securities Act of 1933, as amended (the "Securities Act")
or any state securities laws. The Purchaser understands that the offering and
sale of the Securities is intended to be exempt from registration under the
Securities Act, by
4
virtue of Section 4(2) thereof and the provisions of Regulation D promulgated
thereunder, based, in part, upon the representations, warranties and agreements
of the Purchaser contained in this Subscription Agreement.
(b) The Purchaser and the Purchaser's attorney, accountant, purchaser
representative and/or tax adviser, if any (collectively, the "Advisers"), have
received the Memorandum and all other documents requested by the Purchaser, have
carefully reviewed them and understand the information contained therein.
(c) Neither the Securities and Exchange Commission nor any state securities
commission has approved the Securities, or passed upon or endorsed the merits of
the Offering or confirmed the accuracy or determined the adequacy of the
Memorandum. The Memorandum has not been reviewed by any federal, state or other
regulatory authority.
(d) The Purchaser and the Advisers, if any, have had a reasonable opportunity to
ask questions of and receive answers from a person or persons acting on behalf
of the Company concerning the Offering of the Securities and the business,
financial condition, results of operations of the Company and its subsidiaries,
and all such questions have been answered to the full satisfaction of the
Purchaser and the Advisers, if any.
(e) In evaluating the suitability of an investment in the Company, the Purchaser
has not relied upon any representation or other information (oral or written)
other than as stated in the Memorandum, the Transaction Documents or as
contained in documents or answers to questions so furnished to the Purchaser or
the Advisers by the Company.
(f) The Purchaser is unaware of, is in no way relying on, and did not become
aware of the Offering of the Securities through or as a result of, any form of
general solicitation or general advertising including, without limitation, any
article, notice, advertisement or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, in
connection with the offering and sale of the Securities and is not subscribing
for Securities and did not become aware of the offering of the Securities
through or as a result of any seminar or meeting to which the Purchaser was
invited by, or any solicitation of a subscription by, a person not previously
known to the Purchaser in connection with investments in securities generally.
(g) The Purchaser has taken no action that would give rise to any claim by any
person for brokerage commissions, finders' fees or the like relating to this
Subscription Agreement or the transactions contemplated hereby.
(h) The Purchaser, together with its Advisers, as the case may be, has such
knowledge and experience in financial, tax, and business matters and, in
particular, investments in securities, so as to enable it to utilize the
information made available to it in connection with the Offering to evaluate the
merits and risks of an investment in the Securities and the Company and to make
an informed investment decision with respect thereto.
(i) Except for the representations and warranties of the Company in the
Transaction Documents, the Purchaser is not relying on the Company or any of its
employees or agents with
5
respect to the legal, tax, economic and related considerations of an investment
in the Securities, and the Purchaser has relied on the advice of, or has
consulted with, only its own Advisers.
(j) The Purchaser is acquiring the Securities solely for such Purchaser's own
account for investment purposes only and not with a view to resale or
distribution thereof, in whole or in part. The Purchaser has no agreement or
arrangement, formal or informal, with any person to sell or transfer all or any
part of the Securities and the Purchaser has no plans to enter into any such
agreement or arrangement.
(k) The Purchaser must bear the substantial economic risks of the investment in
the Securities indefinitely because none of the Securities may be sold,
hypothecated or otherwise disposed of unless subsequently registered under the
Securities Act and applicable state securities laws or an exemption from such
registration is available. Legends shall be placed on the Securities to the
effect that they have not been registered under the Securities Act or applicable
state securities laws and appropriate notations thereof will be made in the
Company's stock books. Stop transfer instructions will be placed with the
transfer agent of the Securities. There can be no assurance that there will be
any market for resale of the Securities, nor can there be any assurance that
such securities will be freely transferable at any time in the foreseeable
future.
(l) The Purchaser has adequate means of providing for such Purchaser's current
financial needs and foreseeable contingencies and has no need for liquidity of
its investment in the Securities for an indefinite period of time.
(m) The Purchaser is aware that an investment in the Securities involves a
number of very significant risks and has carefully read and considered the
matters set forth under the caption "Risk Factors" in the Memorandum, and, in
particular, acknowledges that the Company has had a limited operating history
and is engaged in a highly competitive business.
(n) The Purchaser is an "accredited investor" as defined under the Securities
Act and is familiar with the legal requirements to be an "accredited investor".
(o) The Purchaser represents that (i) it was not formed for the specific purpose
of acquiring the Shares, (ii) it is duly organized, validly existing and in good
standing under the laws of the state of its organization, (iii) the consummation
of the transactions contemplated hereby is authorized by, and will not result in
a violation of state law or its charter or other organizational documents, (iv)
it has full power and authority to execute and deliver this Subscription
Agreement and all other related agreements or certificates and to carry out the
provisions hereof and thereof and to purchase and hold the Shares, (v) the
execution and delivery of this Subscription Agreement has been duly authorized
by all necessary action and (vi) this Subscription Agreement has been duly
executed and delivered on behalf of Purchaser and is a legal, valid and binding
obligation of Purchaser. The execution and delivery of this Subscription
Agreement will not violate or be in conflict with any order, judgment,
injunction, agreement or controlling document to which the Purchaser is a party
or by which it is bound.
(p) The Purchaser and the Advisers, if any, have had the opportunity to obtain
any additional information, to the extent the Company had such information in
its possession or could acquire it
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without unreasonable effort or expense, necessary to verify the accuracy of the
information contained in the Memorandum and all documents received or reviewed
in connection with the purchase of the Securities and have had the opportunity
to have representatives of the Company provide them with such additional
information regarding the terms and conditions of this particular investment and
the financial condition, results of operations, business of the Company deemed
relevant by the Purchaser or the Advisers, if any, and all such requested
information, to the extent the Company had such information in its possession or
could acquire it without unreasonable effort or expense, has been provided to
the full satisfaction of the Purchaser and the Advisers, if any.
(q) The Purchaser has significant prior investment experience, including
investment in non-listed and non-registered securities. The Purchaser is
knowledgeable about investment considerations in development-stage companies.
The Purchaser has a sufficient net worth to sustain a loss of its entire
investment in the Company in the event such a loss should occur. The Purchaser's
overall commitment to investments which are not readily marketable is not
excessive in view of the Purchaser's net worth and financial circumstances and
the purchase of the Securities will not cause such commitment to become
excessive. The investment is a suitable one for the Purchaser.
(r) The Purchaser is satisfied that the Purchaser has received adequate
information with respect to all matters which it or the Advisers, if any,
consider material to its decision to make this investment.
(s) The Purchaser acknowledges that any estimates or forward-looking statements
or projections included in the Memorandum were prepared by the Company in good
faith but that the attainment of any such projections, estimates or
forward-looking statements cannot be guaranteed by the Company and should not be
relied upon.
(t) Purchaser does not know of any oral or written representations that have
been made, or oral or written information that has been furnished, to the
Purchaser or the Advisers, if any, in connection with the Offering which are in
any way inconsistent with the information contained in the Memorandum.
(u) The Purchaser should check the Office of Foreign Assets Control ("OFAC")
website at http:/▇▇▇.▇▇▇▇▇.▇▇▇/▇▇▇▇ before making the following representations.
The Purchaser represents that the amounts invested by it in the Company in the
Offering were not and are not directly or indirectly derived from activities
that contravene federal, state or international laws and regulations, including
anti-money laundering laws and regulations. Federal regulations and executive
orders administered by OFAC prohibit, among other things, the engagement in
transactions with, and the provision of services to, certain foreign countries,
territories, entities and individuals. The lists of OFAC prohibited countries,
territories, persons and entities can be found on the OFAC website at
▇▇▇▇://▇▇▇.▇▇▇▇▇.▇▇▇/▇▇▇▇. In addition, the programs administered by OFAC (the
"OFAC Programs") prohibit dealing with individuals(1) or entities in certain
countries regardless of whether such individuals or entities appear on the OFAC
lists;
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(1) These individuals include specially designated nationals, specially
designated narcotics traffickers and other parties subject to OFAC sanctions and
embargo programs.
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(v) To the best of the Purchaser's knowledge, none of: (1) the Purchaser; (2)
any person controlling or controlled by the Purchaser; (3) if the Purchaser is a
privately-held entity, any person having a beneficial interest in the Purchaser;
or (4) any person for whom the Purchaser is acting as agent or nominee in
connection with this investment is a country, territory, individual or entity
named on an OFAC list, or a person or entity prohibited under the OFAC Programs.
Please be advised that the Company may not accept any amounts from a prospective
investor if such prospective investor cannot make the representation set forth
in the preceding paragraph. The Purchaser agrees to promptly notify the Company
should the Purchaser become aware of any change in the information set forth in
these representations. The Purchaser understands and acknowledges that, by law,
the Company may be obligated to "freeze the account" of the Purchaser, either by
prohibiting additional subscriptions from the Purchaser, declining any
redemption requests and/or segregating the assets in the account in compliance
with governmental regulations. The Purchaser further acknowledges that the
Company may, by written notice to the Purchaser, suspend the Purchaser's
redemption rights, if any, if the Company reasonably deems it necessary to do so
to comply with anti-money laundering regulations applicable to the Company or
any of the Company's service providers.
(w) To the best of the Purchaser's knowledge, none of: (1) the Purchaser; (2)
any person controlling or controlled by the Purchaser; (3) if the Purchaser is a
privately-held entity, any person having a beneficial interest in the Purchaser;
or (4) any person for whom the Purchaser is acting as agent or nominee in
connection with this investment is a senior foreign political figure(2), or any
immediate family(3) member or close associate(4) of a senior foreign political
figure, as such terms are defined in the footnotes below; and
(x) If the Purchaser is affiliated with a non-U.S. banking institution (a
"Foreign Bank"), or if the Purchaser receives deposits from, makes payments on
behalf of, or handles other financial transactions related to a Foreign Bank,
the Purchaser represents and warrants to the Company that: (1) the Foreign Bank
has a fixed address, other than solely an electronic address, in a country in
which the Foreign Bank is authorized to conduct banking activities; (2) the
Foreign Bank maintains operating records related to its banking activities; (3)
the Foreign Bank is subject to inspection by the banking authority that licensed
the Foreign Bank to conduct banking activities; and (4) the Foreign Bank does
not provide banking services to any other Foreign Bank that does not have a
physical presence in any country and that is not a regulated affiliate.
4. Irrevocability; Binding Effect. The Purchaser hereby acknowledges and agrees
that the subscription hereunder is irrevocable by the Purchaser, except as
required by applicable law, and
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(2) A "senior foreign political figure" is defined as a senior official in the
executive, legislative, administrative, military or judicial branch of a foreign
government (whether elected or not), a senior official of a major foreign
political party, or a senior executive of a foreign government-owned
corporation. In addition, a "senior foreign political figure" includes any
corporation, business or other entity that has been formed by, or for the
benefit of, a senior foreign political figure.
(3) "Immediate family" of a senior foreign political figure typically includes
the figures parents, siblings, spouse, children and in-laws.
(4) A "close associate" of a senior foreign political figure is a person who is
widely and publicly known to maintain an unusually close relationship with the
senior foreign political figure and includes a person who is in a position to
conduct substantial domestic and international financial transactions on behalf
of the senior foreign political figure.
8
that this Subscription Agreement shall survive the death or disability of the
Purchaser and shall be binding upon and inure to the benefit of the parties and
their heirs, executors, administrators, successors, legal representatives and
permitted assigns. If the Purchaser is more than one person, the obligations of
the Purchaser hereunder shall be joint and several and the agreements,
representations, warranties, and acknowledgments herein shall be deemed to be
made by and be binding upon each such person and such person's heirs, executors,
administrators, successors, legal representatives, and permitted assigns.
5. MODIFICATION. This Subscription Agreement shall not be modified or waived
except by a written instrument signed by the party against whom any such
modification or waiver is sought.
6. NOTICES. Any notice or other communication required or permitted to be given
hereunder shall be in writing and may be mailed by certified mail, return
receipt requested, or delivered against receipt to the party to whom it is to be
given (a) if to the Company, at the address set forth above, or (b) if to the
Purchaser, at the address set forth on the signature page hereof (or, in either
case, to such other address as the party shall have furnished in writing in
accordance with the provisions of this Section 6).
7. ASSIGNABILITY. This Subscription Agreement and the rights, interests and
obligations hereunder are not transferable or assignable by the Purchaser other
than to an affiliate of the Purchaser and the transfer or assignment of the
Securities shall be made only in accordance with all applicable laws.
8. APPLICABLE LAW. This Subscription Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to the principles thereof relating to the conflict of laws.
9. USE OF PRONOUNS. All pronouns and any variations thereof used herein shall be
deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the person or persons referred to may require.
10. CONFIDENTIALITY. The Purchaser acknowledges and agrees that any information
or data the Purchaser has acquired from the Company, its subsidiaries, its
representatives or its agents, not otherwise properly in the public domain, was
received in confidence. The Purchaser agrees not to divulge, communicate or
disclose, except as may be required by law, legal process or regulation, or for
the performance of this Agreement, or use to the detriment of the Company or its
subsidiaries or for the benefit of any other person(s), or misuse in any way,
any confidential information of the Company or its subsidiaries, including any
scientific, technical, trade or business secrets of the Company and any
scientific, technical, trade or business materials that are treated by the
Company or its subsidiaries as confidential or proprietary, including, but not
limited to, ideas, discoveries, inventions, developments and improvements
belonging to the Company or its subsidiaries and confidential information
obtained by or given to the Company or its subsidiaries about or belonging to
third parties. The Purchaser and the Company will consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
press release or other public statements with respect to the Transaction
Documents and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by applicable
law, court process or by obligations
9
pursuant to any listing agreement with any national securities exchange.
Notwithstanding anything to the contrary set forth herein, without the prior
written consent of the Purchaser, the Company shall not disclose the name of the
Purchaser or otherwise identify the Purchaser as a stockholder of the Company
except as may be required by applicable law, court process or obligations
pursuant to any listing agreement with any national securities exchange.
11. PREEMPTIVE RIGHTS.
(a) In the event that the Company at any time proposes to issue any Common Stock
or any other securities of the Company that represent any direct or indirect
rights to acquire, or constitute interests or participations in, Common Stock or
rights to acquire securities that are directly or indirectly exercisable for,
convertible into or exchangeable for Common Stock ("Common Share Equivalents")
(other than securities issued in connection with the transactions listed in
Section 4.3(j) of the Certificate of Designation of the Series G Preferred
Stock) pursuant to an offering by the Company that is exempt from the
registration requirements of the Securities Act (the "Preemptive Securities"),
the Company shall promptly provide written notice thereof (a "Preemptive Rights
Notice") to the Purchaser. Such notice shall specify total size of the offering
and the number and terms of each type and class of Preemptive Security that the
Company proposes to issue and shall include therewith any documentation relating
thereto. The Purchaser shall have the option, exercisable by giving written
notice to the Company within five business days after receipt of the Preemptive
Rights Notice (the "Preemptive Rights Period"), to purchase from the Company
such amount of the Preemptive Securities that would enable such Purchaser to
maintain his, her or its percentage of all of the outstanding the Common Share
Equivalents that are owned by such Purchaser at such time (the "Applicable
Percentage").
(b) In addition to the right of the Purchaser to maintain its Applicable
Percentage, the Company shall use its reasonable efforts to give the Purchaser
who shall have exercised such option an opportunity to purchase the Preemptive
Securities that any Purchaser shall have declined to purchase; provided, that
the Company shall not be required to provide such an opportunity if the board of
directors of the Company determines that this opportunity would be reasonably
likely to cause the Company to be unable to complete an offering of the size
described in the Preemptive Rights Notice.
(c) Any Preemptive Securities purchased by a Purchaser shall be sold by the
Company at the same price (except that, at its option, such Purchaser may, if
the consideration proposed to be received by the Company is other than cash, pay
cash in an amount equal to the fair market value (as determined by the board of
directors of the Company) of such other consideration), and on the same terms
and conditions set forth in the Preemptive Rights Notice. The closing for such
transaction shall take place as proposed by the Company (but in no event (x)
prior to the closing of the sale of the Preemptive Securities to the other
purchasers or (y) less than 12 business days after the purchasing Purchaser
shall have exercised his, her or its option to purchase Preemptive Securities
offered pursuant to a Preemptive Rights Notice), at which closing the Company
shall deliver certificates for the Preemptive Securities in the name of such
Purchaser against receipt of the consideration therefor. All Preemptive
Securities acquired by any Purchaser pursuant to this Section 11 shall
automatically and without further action be subject to this agreement.
10
(d) Unless the Company shall have previously sold Preemptive Securities in the
manner referred to in Section 11(e), the Company may sell any Preemptive
Securities that the Purchasers shall decline to purchase on terms and subject to
conditions that are no less favorable to the Company than those set forth in the
Preemptive Rights Notice at any time during the 120-day period following
expiration of the Preemptive Rights Period.
(e) Notwithstanding Sections 11(a) through (d), the Company may sell Preemptive
Securities to any person so long as the Company no less than 20 business days
after such sale(s), thereafter provides the Purchaser with the rights set forth
in this Section 11.
12. BUYBACK OF SHARES AND WARRANTS. In the event that the Purchaser shall
deliver written notice to the Company of its election to seek redemption
pursuant to this Section 12 of the Subscription Agreement at any time when the
shares of common stock issuable upon conversion or exercise of the Shares and
Warrants then held by the Purchaser shall not then be covered by an effective
registration statement filed with the SEC, the Company agrees that it will,
within 20 days of receipt of such written notice, repurchase the Shares and
Warrants then held by the Purchaser for an aggregate repurchase price of $100 in
cash.
13. MISCELLANEOUS.
(a) This Subscription Agreement constitutes the entire agreement between the
Purchaser and the Company with respect to the subject matter hereof and
supersede all prior oral or written agreements and understandings, if any,
relating to the subject matter hereof. The terms and provisions of this
Subscription Agreement may be waived, or consent for the departure therefrom
granted, only by a written document executed by the party entitled to the
benefits of such terms or provisions.
(b) The parties' representations and warranties made in this Subscription
Agreement shall survive the execution and delivery hereof and delivery of the
Series G Preferred Stock and Warrants.
(c) This Subscription Agreement may be executed in one or more counterparts each
of which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
(d) Each provision of this Subscription Agreement shall be considered separable
and, if for any reason any provision(s) hereof are determined to be invalid or
contrary to applicable law, such invalidity or illegality shall not impair the
operation of or affect the remaining portions of this Subscription Agreement.
(e) Paragraph titles are for descriptive purposes only and shall not control or
alter the meaning of this Subscription Agreement as set forth in the text.
11
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Subscription Agreement as of the date first above written.
The Company: ADVANCED AESTHETICS, INC.
By: ______________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
The Purchaser:
________________________________
________________________________
By: ______________________________
Name:
Title:
Address:
12
Schedule 3(d)
-------------
The Company's Capital Stock
---------------------------
A. Authorized capital stock:((5))
------------------------------
30,000,000 shares of Common Stock, $.01 par value.
1,000,000 shares of preferred stock, $.01 par value.
(i) 20,000 shares of preferred stock designated as Series A
Preferred Stock, $.01 par value.
(ii) 600,000 shares of preferred stock designated as Series B
Preferred Stock, $.01 par value.
(iii) 20,000 shares of preferred stock designated as Series C
Preferred Stock, $.01 par value.
(iv) 8,200 shares of preferred stock designated as Series D
Preferred Stock, $.01 par value.
(v) 500 shares of preferred stock designated as Series E Preferred
Stock, $.01 par value.
(vi) 12,000 shares of preferred stock designated as Series G
Preferred Stock, $.01 par value.
(vii) 5,000 shares of preferred stock designated as Series H
Preferred Stock, $.01 par value.
B. Outstanding capital stock: (1)
------------------------------
(i) 9,268,609 shares of Common Stock
(ii) 7,950 shares of Series A Preferred Stock
(iii) 1,900 shares of Series B Preferred Sock
(iv) 1,300 shares of Series C Preferred Stock
(v) 8,200 shares of Series D Preferred Stock
(vi) 500 shares of Series E Preferred Stock
(vii) 5,000 shares of Series H Preferred Stock.
(viii) 12,000 shares of Series G Preferred Stock.
i. Outstanding options, stock subscription agreements, warrants or
-----------------------------------------------------------------------
other rights permitting or requiring the Company or its subsidiaries or others
--------------------------------------------------------------------------------
to purchase or acquire any shares of capital stock, or other equity securities
--------------------------------------------------------------------------------
of the Company or its subsidiaries, or to pay any dividends or make any other
--------------------------------------------------------------------------------
distribution in respect thereof. (1)
------------------------------------
--------
(5) Assumes the sale of 12,000 shares of Series G Preferred Stock and the
retirement of the Series F Preferred Stock.
a. Outstanding options to purchase 1,079,950 shares of Common Stock and
agreements to issue additional options up to 2,000,000 in the aggregate.
b. Warrants to purchase 1,745,173shares of Common Stock (3,411,840
including the warrants issued at the closing).
c. Subordinated Convertible Promissory Note dated November 26, 2003
convertible into 5,966,444 shares of Common Stock.
ii. Securities issued or outstanding that are convertible into or
exchangeable for any of the foregoing and contracts, commitments or
understandings to issue or grant any such option, warrant, right or convertible
or exchangeable security.((6))
None except as disclosed in this Schedule 3(d).
iii. Shares of stock or other securities of the Company or its
subsidiaries that are reserved for issuance for any purpose (2)
The Company has reserved (i) 2,000,000 shares of Common Stock (which
amount includes outstanding options) for issuance upon exercise of management
options, and (ii) Common Stock for issuance upon conversion of all shares of
preferred stock and exercise of the warrants listed above.
iv. Voting trusts or other contracts, commitments or understandings,
arrangements, or restrictions with respect to the ownership, voting or transfer
of shares of stock or other securities of the Company or its subsidiaries,
including without limitation, any preemptive rights, rights of first refusal,
proxies or similar rights (collectively, the "Stockholders' Agreements") (3)
a. Stockholders Agreement dated as of November 25, 2003 between the
Company and Lord & Foursight, LLC.
b. Stockholders Agreement dated as of November 25, 2003 between the
Company and The ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Irrevocable Trust.
c. Stockholders Agreement dated as of November 25, 2003 between the
Company and Forele Ltd, Inc.
d. Securityholders Agreement dated as of November 25, 2003 among the
Company, FCPR L Capital, et. al.
e. Stockholders Agreement dated as of June 30, 2003 between the Company
and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Living Trust Dated July 9, 2002.
----------
(1) Assumes the sale of 12,000 shares of Series G Preferred Stock.
(2) Does not include shares that may be issued to the holders of the KCO Note
and holders of the Series B Shares upon a Public Transaction as described in the
Memorandum.
(3) Assumes Series F Preferred has been exchanged.
2
f. Stockholders Agreement dated as of December 17, 2003 among the
Company, the ▇▇▇▇▇ ▇▇▇▇▇▇▇ Health System Corporation and the ▇▇▇▇▇ ▇▇▇▇▇▇▇
University.
g. Securityholders Agreement dated as of March 31, 2004 between the
Company and Technology Investment Capital Corporation.
h. Stockholders Agreement dated as of April 23, 2004 between the
Company and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Inc., et. al.
i. Subscription Agreements dated as of September 1, 2005 with
affiliates of Pequot Capital Management and EGE Investors for Series G Preferred
Stock and Warrants.
j. Exchange Agreements with affiliates of Pequot Capital Management
dated September 1, 2005 with respect to the exchange of Series F Preferred for
Series H Preferred and new warrants.
v. Registration Rights Agreements granting persons rights to require
the Company to register any securities of the Company under the Securities Act
or to participate in any such registration (3)
a. Registration Rights Agreement dated as of November 25, 2003 between
the Company and Lord & Foursight, LLC
b. Registration Rights Agreement dated as of November 25, 2003 between
the Company and The ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Irrevocable Trust
c. Registration Rights Agreement dated as of November 25, 2003 between
the Company and Forele Ltd, Inc.
d. Registration Rights Agreement dated November 25, 2003 among the
Company and FCPR L Capital, et al.
e. Registration Rights Agreement dated as of June 30, 2003 between the
Company and the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Living Trust.
f. Registration Rights Agreement dated as of December 17, 2003 among
the Company, the ▇▇▇▇▇ ▇▇▇▇▇▇▇ Health System Corporation and the ▇▇▇▇▇ ▇▇▇▇▇▇▇
University.
g. Registration Rights Agreement dated as of March 31, 2004 between the
Company and Technology Investment Capital Corporation.
h. Registration Rights Agreement dated as of April 23, 2004 among the
Company and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Inc., et al.
(3) Assumes Series F Preferred Stock has been exchanged.
3
i. Registration Rights Agreement dated as of September 1, 2005 among
the Company and the holders of the Series G Preferred Stock and Series H
Preferred Stock of the Company.
C. Shareholders of the Company's capital stock (on an actual and
as-converted into Common Stock basis which assumes that all convertible
securities are converted into Common Stock and all outstanding options and
warrants are exercised to purchase Common Stock) immediately after the closing:
(1)(2)
(1) Assumes the sale of 12,000 shares of Series G Preferred Stock.
(2) Does not include shares that may be issued to the holders of the KCO Note
and holders of the Series B Shares upon a Public Transaction as described in the
Memorandum.
See enclosed chart.
4
ADVANCED AESTHETICS, INC. SHAREHOLDERS/WARRANT HOLDERS
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
NAME COMMON PREFERRED PREFERRED PREFERRED PREFERRED PREFERRED WARRANTS OPTIONS AS-CONVERTED
A B C, D OR G H
((1)) E (AS
INDICATED)
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
Seapine 6,708,147 1,375.657 275,132 6,983,279
Investments,
LLC
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇▇▇ Family 508,979 508,979
Limited
Partnership
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇▇▇ ▇. 104.378 20,875 20,875
▇▇▇▇▇▇
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇▇▇▇ 152,770 31.329 6,266 159,036
▇▇▇▇▇▇▇▇
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇▇▇▇ 91,752 18.077 91,752
Family
Limited
Partnership
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇▇▇▇ ▇▇▇▇ 24,342 4.991 998 25,340
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇▇▇▇▇▇ ▇. 474,321 97.270 19,454 493,775
▇▇▇▇ Grantor
Trust
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇ ▇. ▇▇▇▇ 474,321 97.270 19,454 493,775
Trust
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇▇▇ ▇. 474,321 97.270 19,454 493,775
▇▇▇▇
Trust
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
Sand Dollar 207,441 207,441
Partners,
L.P
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇▇▇▇ 42.541 8,508 8,508
Effress
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇▇▇▇▇ 12,925 2.651 530 13,455
Singer
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇▇▇ 12,925 2.651 530 13,455
Prescott
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ 12,925 2.651 530 13,455
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇▇▇ ▇. 12,925 2.651 530 13,455
▇▇▇▇▇▇▇, Jr.
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
(1) By its terms, the Series B Preferred Stock is not convertible into Common
Stock. Therefore, it is not included in the "As-Converted" column.
*Includes Series G Preferred Stock and warrants being offered.
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇▇▇▇▇ 3,231 0.663 133 3,364
▇▇▇▇▇▇
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇ ▇▇▇▇▇ 69,488 14.250 2,850 275,000 347,338
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇ ▇▇▇▇▇▇ 13,898 2.850 570 14,468
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ 13,898 2.850 570 25,000 39,468
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇▇▇ ▇▇▇▇▇ 10,000 10,000
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇ ▇▇▇▇▇ 80,000 80,000
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇ ▇'▇▇▇▇ 15,000
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇▇▇▇ ▇. 20,000 20,000
▇▇▇▇
Revocable
Trust U/A/D
May 20, 1997
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇ ▇▇▇▇ 40,000 40,000
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
Cosmo 1,300 130,000
▇▇▇▇▇▇▇▇
Living Trust
Dated July 9, Series C
2002
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
L Capital 8,200 9,645,003
Management((7)) Series D
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇▇ 500
▇▇▇▇▇▇▇ Series E 25,000
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
Forele Ltd., 950 47,500
Inc.
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
Lord & 2,600 130,000
Foursight, LLC
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
The ▇▇▇▇▇▇ 1,150 57,500
and ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
Irrevocable
Trust
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
----------
(2) L Capital Management is also the holder of a Subordinated Convertible
Promissory Note which is convertible into 5,966,444 shares of Common Stock. The
"As-Converted" number of Common Stock shares includes 5,966,444 shares upon
conversion of the Subordinated Convertible Promissory Note and 3,678,559 shares
upon conversion of the Series D Preferred Stock.
2
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇▇▇ ▇▇▇▇ 1,625 81,250
▇▇▇▇
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇▇▇ ▇. ▇▇▇▇ 1,625 81,250
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
Technology 618,789 618,789
Investment
Capital Corp.
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
Pequot 7,000 5,000 1,600,000 6,933,333
Capital
affiliates (3)
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
Other Series 5,000 666,667 2,888,889
G Investors
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 30,000 30,000
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
Elan Sassoon 75,000 75,000
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
▇▇▇▇ ▇▇▇▇▇▇ 150,000 150,000
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
Coltrin & 50,000 50,000
Associates
=============== =========== ========== ============ ========== ========= ========= ============= ============ ============
Total 9,268,609 7,950 1,900 1,300 12,000 5,000 3,426,840 605,000* 31,038,507
Series C
8,200
Series D
500
Series E
--------------- ----------- ---------- ------------ ---------- --------- --------- ------------- ------------ ------------
-------------------------------------
*Aggregate number of options issued is 1,079,950. As of the closing, options to
purchase 307,500 shares of Common Stock are vested.
(3) Does not include accrued dividends
3
